We saw the Dollar Index trading to a 11 year high of 100.39 before quickly coming down to trade at the current price of 96.74. The rejection is somewhat strong which is what I believe what Yellen hopes for. The strong dollar speaks not so much to the strength of the US economy but to the continuing weakness in much of the rest of the world. With a notable exception of China, the US economy is growing faster than those of Europe and much of the rest of the world. However the strong dollar is indeed a headache to the FED especially is the dollar rises too fast. It makes US goods and services more expensive in comparison to its competitors. It also reduces corporate profits from overseas operations and may ultimately end up negatively affecting their profit margins.
In the long run, we will still see a strong dollar. The thing now is to anticipate where would dollar find support. I have highlighted the possible short term area of support first at 95.93 and the 93.02 – 94.67 area. The longer term support would be the 90.75 – 90.24 area. The 88.50 is an area which I would be looking closely to buy the dollar.